Peter T. Beach
Phone: 603.627.8185
Fax: 603.641.2396
pbeach@sheehan.com
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How has the tax treatment of stock appreciation rights changed recently?
Friday, March 31, 2006
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| The most important change has to do with the exercising of stock appreciation rights (SARs). An SAR entitles the holder to a payment in cash (or stock), equal to the difference between a base price established at the date of grant of the SAR and the fair market value of the underlying stock at exercise. Before the change, an SAR was typically exercisable by the holder at any time. Now, only an SAR with a base price equal to at least the fair market value of the underlying stock on the date of grant should be made exercisable at will. All others should only be exercisable on a date certain (or a fixed schedule of payment) specified in the deferral election, or in case of death, disability, termination from service, unforeseen emergency, or a change in control.
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